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MARKET COMMENT
By
If you've been glancing at your portfolio in the last few weeks you'll have no doubt noticed liberal amounts of red ink. In fact the main FTSE 100 index has fallen 10% in the last three weeks alone. There seems be no one reason for the fall, but merely a heavy dose of nervousness spurred on by several smaller bits of bad news. It's at times like these that the stock market pundits are wheeled out even more often to share their thoughts on what the market might do next. Will the falls continue? Have we seen the bottom yet? Gargantuan amounts of effort are put into trying to predict the next little uptrend. But it's all a waste of time. It would be nice if we could make these predictions and only invest when the market was about to go up but it just doesn't work out that way. No one ever consistently makes money out of the stock market by predicting short-term movements. Did these pundits predict that the market would fall so suddenly in the first place? Those that did probably predict crashes every other week. At times like these you shouldn't be asking what the market might do next. But you should be thinking about what effect this all has on your own investing strategy. So there is no one answer that suits everybody. If the prospect of further falls worries you, because you'll need the money in the near future (i.e. in the next five years) then you need to question whether you should be in shares at all, or at least thinking about putting money into something less volatile. Do these falls mean that you might need to put in more money in order to reach your investment targets? Do you even have a target and a plan for reaching it? A short-term fall should not affect a long-term strategy. Or are you having doubts that shares are indeed the best way to grow your money over the long term? We've seen bad periods like this before. There have been seven occasions in the last eighty years when the market fell two years on the trot. On two of these there was a third successive fall as well. No matter how you answer these questions for yourself, the next move the stock market makes is likely to have no impact whatsoever.